monchikun
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Joined: 19 Jan 2012
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Posts: 3
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| Posted: 19 Jan 2012 at 12:35 | IP Logged
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Hi all,
So, I'm having some difficulty in sims/MC when they ask VAGUELY what they want - how are you to differentiate and hone in on the answer they're looking for? I've ran into this problem a couple of times, and at first I brushed it off - now, I'm getting to the point that I'm reaching out for help! It's frustrating to know that the material is there, but I get the question wrong because that wasn't the answer they were looking for (well then, be more SPECIFIC! Darn you exam!) For example, in this one sim on business combinations (F3, Sim 2, Becker):
Barnes acquired an interest in Rhodes on Jan 1, Year 1. Calculate the effect on the investment account and income account of Barnes for each year.
Part 1: Not relevant to my issue, so I'm not going to type it. :P
Part 2: Barnes received a 10% stock dividend from Rhodes on Feb 1, Year 2. Rhodes also paid a cash dividend of $8,000 to its shareholders on MAy 31, Year 2. Barnes paid a dividend of $30,000 to its shareholders on October 30, Year 2. Earnings for the year for Barnes and Rhodes was $125,000 and $50,000, respectively.
Now, I was able to get the investment account balance just fine, but the INCOME account from Part 2 is my issue. The "correct" answer is $9,000 which only calculates Barne's share of Rhode's income after depreciation (from Part 1). However, shouldn't it also include Barne's OWN income for that year? (125,000) The question asks specifically the "effect on income statement", and obviously the company's own earnings for that year SHOULD be on the income statement! That would effectively make the correct answer 134,000, but the exam only wants the 9,000 as the answer.
I'm just astonished that I could get this part of the question wrong because of the wording in the question. It's not even tricky - it's just WRONG! And what makes it worse, I'll be wasting precious time thinking over each question to make sure that's what the exam wants, and doubting each of my answers!
I know that maybe I should just assume the question wants the answer that relates to the business combination, since that's what it seems to be asking. However, I swear in some previous MCs, they wanted the CUMULATIVE effect for other topics, but of course, are vague!! I just don't know how to differentiate!!
If someone sees something else in this question, please post and shed some light! I want to get this habit fixed before I plant a huge seed of doubt into my test-taking abilities! Thank you. :)
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Topic: Vague Questions - How to Answer??
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